Inventors often have great ideas they can't afford to
introduce effectively. The traditional way around this is to
license your invention to a manufacturer. But there's another
method that offers many advantages over licensing: arranging with a
manufacturer or a distributor/wholesaler to sell your product on
commission.

Selling on commission is an ideal approach if you see a market
opportunity but don't have the expertise to develop the
product. Essentially, the other company handles product design and
engineering, and pays the person who knows the product
best-you-to sell it.

Selling on commission allows you to enter the market, get
established and generate income quickly. You can proceed with your
invention even with limited patent protection and continue to have
input into your product's development.

The beauty of selling on commission is that you typically
don't have to put up any money. The manufacturer pays for the
patent application, start-up costs and operating capital required
to launch the product. Your only expenses are defining the product,
possibly making a model or prototype, and making your early market
connections.

While selling on commission provides the contacts you need to
branch out and start your own company, the product will always
belong to the company you are selling it through. If you don't
want the hassle of running your own company, this is an ideal
tactic. If your product is a winner, you'll be able to
introduce new products through the manufacturer. And if you want to
break out on your own . . . well, more about that later.

Let's Make a Deal
You'll have an easier time making a commission arrangement if
you have a sales and marketing background, but it's not
essential. Here are some steps to improve your chances of
success.

First, be sure you're approaching the right manufacturer.
Selling on commission works best when the manufacturer has to make
only minimal changes to its processes to produce the product.
Manufacturers want a quick profit; they don't want to invest a
lot of money.

Because the manufacturer or distributor who hires you on
commission is really buying your ability to sell the product, you
must know who the key players in the distribution network are and
have their support before you approach a manufacturer. Read trade
magazines and attend trade shows to learn who the best contacts
are. If possible, get letters of support to show to manufacturers,
stating the person believes your idea has merit and would consider
selling it when the product becomes available. Better still, have
at least one or two key customers presold so you can produce
immediate results.

You get better results with a manufacturer if you propose your
arrangement in steps. This gives them a chance to warm up slowly.
Start by approaching them to see if they would make your product
for you as a contract manufacturer. At a later meeting, tell them
how the product's potential is larger than you expected and how
you can't afford to proceed on your own.

The most successful products are typically based on customer
desires. When you talk about your product to manufacturers, always
start with a customer focus, detailing how you have surveyed
customers and how your product meets their needs.

A manufacturer probably won't make an investment without
some positive response from customers who have seen a prototype.
However, you can often persuade the manufacturer to pick up some,
if not all, of the expense of producing a prototype, especially if
the manufacturer already makes similar products.

One caution: By selling on commission, you run the risk of the
manufacturer trying to steal your idea. But you can usually prevent
this by simply applying for a provisional patent just before
contacting potential manufacturers. That allows you to state that
your patent is pending. You can then agree to assign the patent to
the manufacturer if they agree to pay the full patent application
and issue fees.

WHAT TO EXPECT

The manufacturer
won't automatically print brochures, attend trade shows or pay
for a marketing program. Be sure to propose a marketing
program and get the manufacturer's approval before signing a
contractor agreement.

You will be paid
commissions only after customers pay for their products-and
you may go three to four months before sales are made. You
can ask the manufacturer for an advance against commissions to
cover those costs, but the manufacturer isn't obligated to
offer an advance unless it is part of your agreement.

The manufacturer
might offer you its standard sales representative agreement, which
pays a commission only on the products you sell. Insist on a
commission on all your products, including an override (or
commission payment) of several percent on any of your products sold
by other salespeople or independent representatives.

The manufacturer
will want to produce the product as cheaply as possible and may
compromise some of its features. You'll need to monitor
closely the manufacturer's design to prevent this.

The manufacturer
will be reluctant to make changes in the product once it starts
production on it. Be sure to show a model or prototype to
your potential customers and get their approval before the
manufacturer finalizes tooling and the manufacturing
process.

Building Momentum

Once you have a commission sales agreement in place, here's
how to make the most of the relationship:

Act big: One of the reasons
to go with a manufacturer or distributor is to use their size to
build credibility. Have your business card state the company's
name; always mention the company's name when you call; and be
sure to have first-class brochures, marketing materials and trade
show booths that clearly call out the company's name.

Set up distribution: There
will usually be plenty of sales opportunities for a product other
than the big accounts you use to land your agreement. Your goal is
to continue to increase the product's sales, which you can do
by hiring manufacturers' sales agents to cover the country by
adding distribution in new markets. You have to pay the new
representatives a commission, but you will still receive your
override commission.

Hire other salespeople:
Your long-term goal is to keep producing new products. You
can't do that if you have to handle all the sales on your own.
Work with the company to hire new salespeople, accepting the fact
that your only pay is your override. This boosts sales and allows
you to branch out into new products.

Building a Business
Once you have a sales relationship, you can continue introducing
products through that manufacturer or strike out on your own. If
the latter is appealing, take these steps to prepare:

Hone your skills: Your
long-term success in commission sales depends either on your
expertise at introducing a product or on your creativity in
continually coming up with new product ideas. Both of these skills
are ideal building blocks for going into business for yourself. You
may not be able to reclaim your original product, but you can move
on to introduce a new product of your own or even products from
other inventors.

Create an industry
presence: Become known in your industry by being on
industry committees, volunteering for associations and serving on
committees. You can also write articles for trade magazines, give
speeches or presentations, and volunteer to help with training
meetings.

Take control: There is an
inevitable clash when you sell your product on a commission basis
for a company. You want to develop a network of contacts that helps
you increase sales, makes you important to manufacturers, and sets
the stage for future sales growth. The manufacturer, on the other
hand, feels vulnerable if it doesn't have direct contact with
customers and the distribution channel. The best strategy is to
introduce buyers and distribution channel contacts to the
manufacturer when starting out, then cut back the
manufacturer's involvement as sales develop.

FIRST, CONTACT

To find the key
players in your industry, check out Gale's Encyclopedia of
Publications and Broadcast Media, Gale's Source of
Associations, and various trade show directories available at
larger libraries. You can also contact the writers of articles in
trade magazines and ask them who the key players are in a business.
Often these authors are industry people who will provide you with
names and may even tell you who the best candidates are to buy your
product.

Adapted from Think Big: Nine Ways to Make Millions From
Your Ideas (Entrepreneur Press). Don Debelak is president of DSD
Marketing, an inventor assistance firm. He has helped introduce
more than 100 products in his 20 years of new-product
experience.